Lesson of Carillion collapse is to embrace, not reject, business

posted onFeb. 05, 2018 at 8:18 am

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LONDON — As with Brexit, the response to the collapse of Carillion, U.K.’s second-largest construction company, should be led by evidence, not ideology. It’s dangerous to disregard the idea that a prosperous country with rising living standards is underpinned by successful enterprises.

Around the world, people benefit most when business and government work together. Firms bring innovation — from technology to health care — and wealth for individuals and the state. Government sets the rules of the game and should intervene effectively and proportionately where there are clearly identified market failures. Together they can tackle the biggest challenges society faces.

Business must work hard to maintain the trust needed to build this relationship. The vast majority do, getting the business basics right so that customers, employees and suppliers benefit from their growth, and actively stepping in to tackle problems from skills and social mobility to climate change. Whenever firms fail to do so, the belief that business plays by its own rules only grows.

The U.K. government — and the opposition — must do their part and support businesses’ role as the country’s main driver of prosperity. To do this, the government must set a long-term vision for the U.K.’s economy and create an environment in which every investment moves standards of living forward and tackles inequality. It must also respond honestly when things go wrong, rather than look to win quick votes.

Current efforts to support staff and suppliers struggling with the damaging impact of Carillion’s collapse must take priority. But then lessons must be learned.

In few areas does this matter more than in public-private partnerships. The rewards here can be huge and lend vital help to communities, from finding new ways to care for elderly people to building new schools and upgrading physical and digital infrastructure. But because these partnerships involve taxpayers’ money, the consequences of failure are greater and expectations of fair conduct far higher.

Current efforts to support staff and suppliers struggling with the damaging impact of Carillion’s collapse must take priority. But then lessons must be learned.

This can only happen with full disclosure. Carillion must be a model of openness, with no attempts to hide any bad decisions or mistakes made. The damage is done. Now we must find ways to better protect people in the future.

The same applies in Westminster. Politicians must resist the temptation to deflect blame. There are legitimate questions to ask of those responsible — past and present — for issuing public contracts. Low-cost deals may look cheap for taxpayers in the short-term but they restrict innovation and make suppliers vulnerable to an ever-changing delivery environment. In transferring risk and responsibility to the private sector, successive governments have left Whitehall without the commercial skills needed to make complex projects sustainable over the long-term.

Since Carillion collapsed, the knee-jerk reaction from some is to suggest shutting out business from public life. This smacks of ideology and would be an enormous waste. Firms bring vital investment and innovation at a time when our public services are under great pressure. The question is how best to unlock — not block — those opportunities.

This is especially true at a time where the U.K. government and the European Union are involved in a game of “who blinks first” in Brexit negotiations, and U.K. businesses — while largely optimistic — are concerned that the “drip drip” loss of investment opportunities will continue while Brexit uncertainty exists.

To rebuild public confidence, government and business need to change the way they work together. An important first step should be an evidence-led strategic review into the health and sustainability of public-private partnerships — with help from the Confederation of British Industry (CBI), the Federation of Small Businesses (FSB) and other relevant parties.

But ultimately the real answer is action. Government must recognize and support the thriving supply chains of small and large businesses that are already the norm and are working together to deliver value. It must also act as a true champion of enterprise, extending best practice to benefit society. And all parties must be honest about success and failure.

If one good thing comes from the mess of Carillion, it should be that this kind of disaster never happens again. Successful public-private partnerships aren’t a political sideshow, they are fundamental part of a successful economy. Making them work is everyone’s business.

Josh Hardie is deputy director general of the Confederation of British Industry.